Bio Energy: Mass, Gas and Fuel
Contents
Introduction
Natural waste-to-energy
Market forces
Facts and Figures
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Opportunities in Mass
Overlooked biological waste could be the key to utlizing existing and emerging technologies
As energy utilities move away from fossil fuels to meet international emissions reduction commitments, all renewable energy sources are garnering considerable interest — and biomass is no exception. The International Energy Agency (IEA) predicts that the global demand for biofuels will grow by 28% between 2021 and 2026. “Biomass energy” refers to energy from biomaterials, including food waste, crops, animal and agricultural waste, wastewater, and wood. The most common materials used for bioenergy are plants, wood, and waste, which are processed and converted into biogas or biofuels. Anaerobic digesters facilitate the production of biogas, providing ideal conditions for anaerobic decomposition. Biomethane is a byproduct of biogas. The resulting biomass and biomethane can then be used for energy via thermal conversion, often through co-firing in coal plants. Additionally, biomass can be converted into ethanol.
New regulations, subsidies, carbon pricing (in Europe), depletion of fossil fuels, and discussions surrounding CO2-induced climate change have widened the biomass market. In addition to its low-carbon attributes, biofuel offers attractive benefits to grid operators thanks to its reliable, on-demand sources of electricity and ability to dispatch electricity upon request from power grid operators according to market needs. To support these growing markets, sustainable ecosystem management must be central to bioenergy supply chain operations.
Market Trends: Facts, Figures, Forces
Market facts
Biomass fuels provided about 5% of total primary energy use in the United States in 2021. Of that, about 48% was from biofuels (mainly ethanol), 43% was from wood and wood-derived biomass, and about 9% was from municipal waste.
The COVID-19 pandemic negatively impacted the biofuel market, causing production to drop to its lowest capacity in the past decade.
Bioenergy currently accounts for about one-tenth of total primary energy supply globally.
According to a 2016 report, the U.S. has the potential to produce 1 billion dry tons of non-food biomass resources annually by 2040. In 2021, the US produced 17.5 billion gallons of biofuels and was a net exporter of biofuels (mainly ethanol).
The biomass power generation market is expected to grow at a compound annual growth rate (CAGR) of 6% from $45 billion in 2020 to $85.3 billion by 2031.
Market Figures
Ethanol remains the most produced fuel type, but as oil prices increase so does demand for biofuel.
market forces
Bioenergy has the capacity to decrease American reliance on fossil fuels — especially oil imports — and bring economic growth to those in rural areas of the country.
The U.S. has a number of incentives and tax credits to encourage landowners and operators to produce and deliver biomass feedstock crops.
In the U.S., the Sustainable Aviation Challenge is pushing the airline industry to use 11 billion liters of sustainable aviation fuel (SAF), or 15% of current jet fuel demand, by 2030.
Investment Opportunities
Investors can accelerate deployment of biomass across several areas (direct electricity generation by combustion, biofuel production, or biogas production) by financing small-scale projects and partnering with research hubs. Providing growth-stage capital for private companies is one method for supporting technological and operational innovations, while venture-stage investments in bioenergy technologies can offer ancillary exposure. The industry is creating new methods to increase the energy density of biomass, thus improving its electricity-generation efficiency. The development of technologies for creating biofuels presents possible direct investment opportunities while providing insight into how to address current energy challenges.
Potential solutions revolve around three core themes:
Sustainable biomass sourcing practices
Preventing biofuel material input from competing with food production
Improving biomass degradation rates, which impacts long-distance transport and storage time
Market Segments
Biomass for Biofuels
Biomass can also be used as liquid fuel, which is a boon to the transportation sector’s overall sustainability. Unlike fossil fuels, first-generation biofuels are usually made from renewable feedstocks such as sugar crops, starch crops, and animal fats. There are also second- and third-generation biofuels made from cellulose and algae that are comparable to gasoline in terms of efficiency. Many studies find that biofuels cause lower life cycle greenhouse gas (GHG) emissions compared with conventional fuels. The IEA predicts that global demand for biofuels will increase by 28% from 2021 to 2026
Biofuel comes in two common forms — ethanol and biodiesel — that can be blended with gasoline (to varying degrees) and are currently approved for use in most gasoline-powered vehicles.
Large-scale biojet fuel deployment will be necessary in order for the aviation industry to achieve net carbon growth by 2050 — so long as the biofuels are produced and selected utilizing sustainable practices.
The U.S. Department of Energy estimates that it would take roughly 15,000 square miles (half the size of the U.S. state of Maine) to grow enough algae to replace all petroleum-fueled energy needs in the United States.
In late 2021, the U.S. Department of Energy announced nearly $34 million in funding for waste and algae bioenergy technology.
Biogas
Biogas is naturally produced from the decomposition of organic waste through anaerobic digestion. It is an environmentally friendly energy source, as it stores methane normally released from global waste production and reduces reliance on fossil fuels to meet global energy demand.
Biodigesters capture the biomethane and prevent it from escaping into the atmosphere, making the utilization of food waste as biofuel a more-climate-friendly option than decomposition in a landfill.
The U.S. has only 2,200 biogas systems in operation, which equals less than 20% of its potential of over 13,500 systems.
The global biogas power generation market stood at almost $45 billion in 2020 and is expected to grow with a CAGR of 6% between 2021 and 2031.
With 100 tons of food waste a day, anaerobic digestion can produce enough energy to power 800–1,400 homes each year.
A Natural Transition
At full utilization, up to 11 million cars worth of methane emissions could be saves
Impact
If all the potential biogas in the United States were to be utilized, the reduction in methane emissions would be equal to the annual emissions of 800,000 to 11 million passenger vehicles.
Using biomass as an energy source can greatly reduce GHG emissions. However, for there to be a net decrease in emissions, biomass needs to be sourced from previously cleared land rather than newly cleared forest.
Increased biomass energy and biofuel use supports agricultural and forest product industries here at home. The main feedstocks for bioenergy are paper mill residue, lumber mill scrap, municipal waste, corn, and soybeans.
As with many renewable energy sources, increasing our use of biomass for energy would reduce American reliance on foreign oil.
Market Movers: Current and Future Heavy Hitters
Emerging Technologies Companies
Bio-bean (UK) is a London-based company that has scaled the process of converting coffee ground waste into biofuel. Bio-bean currently recycles the beans from Costa Coffee, London Stansted Airport, and the UK’s Network Rail. The company was recognized as a Best for the World™ B Corp™ for 2021 for the second year in a row. It also closed an investment round in September 2021.
Baltania OÜ (EE) is an Estonia-based company under the climate tech company Perpetual Next. Baltania produces carbon pellets for fuel through Perpetual Next’s patented torrefaction technology. In November, 2017, the company received an investment of $53 million from Momentum Capital to build a bio-coal plant in Estonia. This plant will use their proprietary process to produce 160,000 metric tons of bio-coal products for energy use a year.
Waste2Fuels (ES) is a Barcelona-based company whose goal is to convert agro-food waste into biofuel. Waste2Fuels is aiming to produce biobutanol, which can be combined with gasoline and diesel fuel to make a viable transition fuel that is more sustainable than either diesel or gasoline. Since its inception in late 2018, Waste2Fuels has received over $6 million in funding to develop its technology.
BioTrans Nordic (DK) is a Denmark-based company that manufactures waste-disposal units that break down, store, and transport food waste for use in biofuels. Their product, the BioMaster, is able to shred and store food from industrial kitchens before turning it into biogas. The BioTrans system also provides its users with analytics on how to better optimize waste processes.
NEXT Renewable Fuels, Inc. (US) is an Oregon-based company that converts recycled organic materials into biofuel with the same functional use as diesel fuel using a process that reduces GHG emissions by up to 85%. In March 2022, the Oregon Department of State Lands approved a key permit for NEXT’s $2 billion renewable diesel project.
Venture Capital/PE and Other Fund Investors
Cycle Capital Management is a Canadian impact investment firm dedicated to building innovative cleantech companies with cutting edge technology. The company manages C$500 million (~$390 million) in funds. In April 2022, Cycle Capital announced the first closing of its new Circular Innovation Fund at $160 million.
Marathon Capital, a global energy and infrastructure investment bank, has served as an advisor for several energy transactions and company expansions across a multitude of industries, including renewables, sustainable technologies, and energy storage. In 2021, it advised on a joint venture between Global Common Energy and UGI Energy Services to develop dairy farm digester projects to produce renewable natural gas.
Braemar Energy Ventures is a VC fund that focuses on investments in early stage energy-tech companies. Braemar has a history of investing in emerging biomass companies, such as Enerkem, a producer of low-carbon intensity biofuels and circular chemicals from waste that in April 2022, announced that it had raised $255 million in new financing.
Bioenergy Infrastructure Group (BIG) holds one of the UK’s largest portfolios of biomass and waste-to-energy facilities, predominantly focusing on mid-scale plants. In May 2022, BIG partnered with C-Capture on a £2.7 million (~$3.3 million) project to test its carbon capture technology at some of BIG’s waste-to-energy sites.
Maven Capital Partners (through Finance Durham Fund) is a leading UK private equity firm and property manager focused on a wide variety of UK private companies tackling ESG (Environmental, Social, and Governance) issues. In 2021, Maven was acquired by Mattioli Woods PLC, which, in June, 2022, funded Roadgas, a leading biomethan supplier in the UK.
Denham Capital, founded in 2004, is a Boston-based PE fund focused on global energy, resource, and sustainable infrastructure companies. Denham is the majority owner of Greenleaf Power, a company that specializes in the acquisition and development of biomass companies and plants.
Algae-to-Fuel
The US Government has provided funding for technologies which turn algae into an energy source.
Final Thoughts
There is no doubt that we are facing an energy crisis as we try to find ways to reduce human reliance on fossil fuels and combat climate change. Biomass is a renewable energy source that has the potential to address many of our energy needs, from electricity production to vehicle fuel, due to its reliability and dispatchable nature. However, biomass is not without its flaws. The land acquisition and maintenance required to produce feedstock for bioenergy can undo many of the benefits of utilizing this renewable resource. One of the major disadvantages of ethanol biofuel, for example, is it requires farmland to grow crops and thus directly competes with food production for land, water, and fertilizer. Additionally, changes in land use can release GHG emissions previously trapped in terrestrial carbon stocks. To overcome these drawbacks, the bioenergy industry is working to use biomass from industrial and municipal waste and forestry/agricultural residues to limit land use and additional GHG emissions.